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Client Alert
Corporate Transparency Act’s Imminent Effectiveness and Reporting Requirements – Puerto Rico
By: Rebecca Cuevas Fontán, Esq.
Magdalis A. Prats Figueroa, Esq.
December 27, 2023
Effective January 1, 2024, the U.S. Corporate Transparency Act, 31 U.S.C. § 5336 (the “Act”), will require, with some limited exceptions, that all domestic and foreign corporations and other legal entities (“Reporting Companies”) submit certain information about their beneficial owners to the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”). This requirement is extensive to entities registered in the Commonwealth of Puerto Rico. Reporting Companies created or registered on or after January 1, 2024 and before January 1, 2025, will have 90 days after receiving notice of their company’s creation or registration, to file their initial beneficial ownership information ("BOI") reports. Reporting Companies created prior to said date will have until January 1, 2025, to file their initial BOI report with FinCEN, and Reporting Companies created or registered on or after January 1, 2025, will have 30 calendar days from notice of their creation or registration to file their BOI reports with FinCEN.
Most entities are considered Reporting Companies unless they fall within one of the 23 exceptions of the Act. For example, some exempted entities include: (i) governmental agencies, (ii) banks, (iii) inactive entities, (iv) tax-exempt entities, (v) state licensed insurance producers, among others. If a Reporting Company is required to report, the following step is to determine who is considered the beneficial owner. Pursuant to the Act, a beneficial owner includes any individual who, directly or indirectly: (i) exercises substantial control over a Reporting Company, or (ii) owns or controls at least 25 percent of the ownership interests of a Reporting Company. An individual may be a beneficial owner through substantial control, ownership interests, or both. There could also be more than one beneficial owner per Reporting Company. This disclosure requirement is separate and different from those that already existed with tax agencies such as the Puerto Rico Treasury Department or the U.S. Securities and Exchange Commission.
Willful failure to report, complete, or update the BOI to FinCEN, or the willful attempt to provide false or fraudulent BOI, may result in civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or fines up to $10,000.
The foregoing reporting requirements are not in effect until January 1, 2024. No reports will be accepted prior to that date. Reporting Companies will be able to do so on or after January 1, 2024.
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